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Why Texas and D-FW are poised to lead a strong recovery when the pandemic fades
This is an article copied from the Dallas Morning News
By Mitchell Schnurman
6:00 AM on Feb 5, 2021
The 'Welcome to Texas' sign greets drivers as they enter the Lone Star State near Denison. Last year, Texas added far more residents than any state, and much of the gain was likely due to newcomers from elsewhere in the U.S. The population growth, along with a larger workforce, raise the prospects of a faster economic recovery for the state and Dallas-Fort Worth.( Tom Fox - Staff Photographer )
Is it too soon to talk about green shoots? We’re still in the throes of the pandemic economy with over 1 million Texans looking for work and an unemployment rate twice as high as a year ago.
But there are encouraging signs, including strong interest from outsiders, which has always been crucial to Texas’ growth story. Last year, Texas’ population grew by almost 374,000, far more than any state and more than the year before COVID-19 emerged. That strongly suggests Texas continued to draw migrants from elsewhere.
Texas also added to its civilian labor force in 2020, a notable achievement. Over 4 million Americans dropped out of the workforce last year, often because of public health concerns or caregiving duties. Among the 10 most populous states, only Texas posted a gain in the labor force, according to data from the U.S. Bureau of Labor Statistics. In addition, the pipeline of potential relocations and expansions has grown since COVID. And by one assessment, Dallas-Fort Worth currently ranks as the strongest labor market in the country.
“Texas is the shining example that the pandemic has not hit every place the same,” said Jay Denton, chief innovation officer at ThinkWhy, a Dallas-based software services company whose products compare top talent and salaries in the U.S.
The positive perceptions stem from fewer restrictions on business, he said, along with a history of strong growth. In the past decade, Texas added more people than the bottom 37 states combined, he said, and he believes the pandemic will create more separation with rivals.
“Because of how jobs have been disrupted and how companies’ balance sheets have been disrupted, the gap is going to grow even wider in the coming years,” Denton said.
His firm compared 150 metros on 10 economic measures, including growth in jobs, wages and college graduation. By its LaborIQ index, Dallas-Fort Worth ranked No. 1, ahead of Boise, Idaho, and Charlotte, N.C. Houston ranked ninth and Austin, 11th.
No other state was close to putting three metros in the top 15.
“The underlying health of the economy [in Texas] is much, much stronger than we’re seeing in most other locations across the country,” Denton said.
D-FW easily leads the top-ranked metros in net migration, a key metric. For many years, Texas has been growing jobs at roughly twice the rate of the nation, and about half the advantage has come from net gains in domestic and international migration.
While migration statistics for 2020 have not been released, Texas’ population gains for the year ended last July 1 are a strong indicator that the state continued to be attractive. California, New York and Illinois, which lost many residents to Texas in the past, posted big declines in population last year.
After the Great Recession, Texas’ economy recovered much faster, in part because it was a magnet for residents from other states. The net inflow boosted population and job growth, and the same dynamics could be in place when the pandemic fades, said Christopher Slijk, an associate economist at the Federal Reserve Bank of Dallas.
“We tend to do better, in part from having a lower cost of living and a lower cost of doing business,” Slijk said. “Depending on the course of the pandemic, it looks like we’ll have some of that growth premium going into this year as well.”
The Dallas Fed projected a gain of over half a million jobs in Texas this year. That would be the largest annual increase ever, but it would still be short of replacing the 580,000 jobs lost in 2020, according to the Dallas Fed.
At least Texas ended 2020 with a slightly larger labor force. That increases the talent pool and prospects for a faster recovery, especially when other big states are shrinking.
“Momentum is a pretty powerful thing,” Slijk said. “Looking out to the medium- and long-term, I think the relative attractiveness of Texas has increased” since the pandemic.
So does Scott Shepard, a real estate agent who started ExitCalifornia.org, a website to help people leave the state. In the past year, his firm handled over 1,800 exits from California, and nearly 1 in 4 moved to Texas, he said. That was three times more than runner-up Arizona.
“The pandemic created a unique sense of urgency,” Shepard said.
The Fort Worth Chamber of Commerce had been talking with Incora, a California-based supply chain management company, since 2018. In September, the company decided to consolidate offices and move its global headquarters to a new location in Fort Worth.
“In the middle of a pandemic, they said, ‘We gotta do this,’” said Chris Strayer, who leads economic development for the Fort Worth Chamber of Commerce.
Last week, Strayer was talking with another California company still waiting to announce a move. He said the CEO was ready to come to Texas first and bring other employees later.
The CEO of a California bank, First Foundation, has a similar plan. Last month, Scott Kavanaugh told analysts that he’d already bought a home in D-FW and was scouting for a location for the holding company headquarters.
Said one analyst on the call: “It makes a ton of strategic sense.”
Last year, the Fort Worth Chamber submitted 121 requests for proposals for potential relocations and expansions, up from 85 the year before COVID, Strayer said. At the Dallas Regional Chamber, trends are similar with almost twice as many projects being tracked, said Mike Rosa, who leads economic development for the organization.
The pandemic is exposing strengths and weaknesses, Rosa said, “And Texas’ light has been shining brighter over the past many months.”
He pointed to the diversification and depth of the regional and state economy, from corporate headquarters to logistics companies to defense contractors to technology players. The business mix attracts more employers and workers.
Cities in North Texas also have invested heavily in parks, transit, downtown living and other amenities. When the pandemic ends, he expects a surge in activity.
“Sometimes I pinch myself thinking about next year and a couple of years from now — and where we might end up after all this is through,” Rosa said.